Question

Which of the following statements is false with respect to tax treaties?

1) The Code always overrides the treaty when in conflict.
2) The Code may override a treaty when the two are in conflict.
3) The United States sometimes signs certain tax treaties with other countries.
4) Taxpayers must disclose any position where a treaty overrides a tax law.
5) Treaties may override a Code Section when in conflict.

Answer 1

The false statement regarding tax treaties is that the Code always overrides the treaty when in conflict. Tax treaties can override the Code when there is a conflict, but taxpayers must disclose such positions.

Step-by-step explanation:

The statement that is false with respect to tax treaties is: 1) The Code always overrides the treaty when in conflict. In the context of U.S. law, tax treaties can and often do, override provisions of the U.S. Tax Code (the Code) when the two are in conflict. This is based on the principle known as "the last in time rule," where the most recent law or treaty supersedes the earlier ones if there is a direct conflict.

However, to exercise the benefits of a tax treaty over the Code, taxpayers must disclose their position, as outlined in Statement 4, to ensure transparency and compliance with U.S. tax law.